Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The...
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Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: B Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019; January 1 420,000 May 1 381,000 October 1 552,000 2020: March 1 June 30 1,428,000 624,000 Amounts borrowed and outstanding: $1.6 million borrowed at 12%, specifically for the project $4 million borrowed on July 1, 2018, at 14% $18 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 Capitalized interest, 2020 $ 933,000 X $ 2,052,000 X 2. If it is assumed that the production complex has an actionated life of years and a residual value of $0, compute the straight-line depreciation in 2020. 115,825 X $ Alpha-numeric input field 3. Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report higher income than if it had not capitalized interest. In future periods, the same company will report income than if it had not capitalized interest. lower Interest During Construction Alta Company is constructing a production complex that qualifies for interest capitalization. The following information is available: B Capitalization period: January 1, 2019, to June 30, 2020 Expenditures on project: 2019; January 1 420,000 May 1 381,000 October 1 552,000 2020: March 1 June 30 1,428,000 624,000 Amounts borrowed and outstanding: $1.6 million borrowed at 12%, specifically for the project $4 million borrowed on July 1, 2018, at 14% $18 million borrowed on January 1, 2017, at 8% Required: Note: Round all final numeric answers to two decimal places. 1. Compute the amount of interest costs capitalized each year. Capitalized interest, 2019 Capitalized interest, 2020 $ 933,000 X $ 2,052,000 X 2. If it is assumed that the production complex has an actionated life of years and a residual value of $0, compute the straight-line depreciation in 2020. 115,825 X $ Alpha-numeric input field 3. Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report higher income than if it had not capitalized interest. In future periods, the same company will report income than if it had not capitalized interest. lower
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Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
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